David N. Adams Inc.David Adams, CLU, ChFCPresident324 Sixth Ave. NorthJacksonville Beach, FL 32250904-339-0015dadams@sagepointadvisor.comwww.DNAfinancial.com

Teach Your Children Well:Basic Financial Education

September 25, 2012

Even before your children can count, they alreadyknow something about money: it's what you have togive the ice cream man to get a cone, or put in theslot to ride the rocket ship at the grocery store. So, assoon as your children begin to handle money, startteaching them how to handle it wisely.

Making allowancesGiving children allowances is a good way to beginteaching them how to save money and budget for thethings they want. How much you give them dependsin part on what you expect them to buy with it andhow much you want them to save.

Some parents expect children to earn their allowanceby doing household chores, while others attach nostrings to the purse and expect children to pitch insimply because they live in the household. Acompromise might be to give children smallallowances coupled with opportunities to earn extramoney by doing chores that fall outside their normalhousehold responsibilities.

When it comes to giving children allowances:

• Set parameters. Discuss with your children whatthey may use the money for and how much shouldbe saved.

• Make allowance day a routine, like payday. Givethe same amount on the same day each week.

• Consider "raises" for children who manage moneywell.

Take it to the bankPiggy banks are a great way to start teaching childrento save money, but opening a savings account in a"real" bank introduces them to the concepts ofearning interest and the power of compounding.

While children might want to spend all their allowancenow, encourage them (especially older children) todivide it up, allowing them to spend someimmediately, while insisting they save some towardthings they really want but can't afford right away.Writing down each goal and the amount that must be

saved each week toward it will help children learn thedifference between short-term and long-term goals.As an incentive, you might want to offer to matchwhatever children save toward their long-term goals.

Shopping senseTelevision commercials and peer pressure constantlytempt children to spend money. But children needguidance when it comes to making good buyingdecisions. Teach children how to compare items byprice and quality. When you're at the grocery store,for example, explain why you might buy a genericcereal instead of a name brand.

By explaining that you won't buy them somethingevery time you go to a store, you can lead childreninto thinking carefully about the purchases they dowant to make. Then, consider setting aside one day amonth when you will take children shopping forthemselves. This encourages them to save forsomething they really want rather than buying onimpulse. For "big-ticket" items, suggest that theymight put the items on a birthday or holiday list.

Don't be afraid to let children make mistakes. If a toybreaks soon after it's purchased, or doesn't turn out tobe as much fun as seen on TV, eventually childrenwill learn to make good choices even when you're notthere to give them advice.

Earning and handling incomeOlder children (especially teenagers) may earnincome from part-time jobs after school or onweekends. Particularly if this money supplements anyallowance you give them, wages enable children toget a greater taste of financial independence.

Earned income from part-time jobs might be subjectto withholdings for FICA and federal and/or stateincome taxes. Show your children how this takes abite out their paychecks and reduces the amount theyhave left over for their own use.

Creating a balanced budgetWith greater financial independence should come

As soon as your childrenbegin to handle money,start teaching them howto handle it wisely.

Page 1 of 2, see disclaimer on final page

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2012

IMPORTANT DISCLOSURES

Securities and Investment Advisory Services are offered through SagePoint Financial, Inc., member FINRA/SIPC and a registered investmentadvisor. Insurance and tax services are offered through David N. Adams, Inc. which is not affiliated with SagePoint Financial, Inc or registered asa broker dealer or investment advisor.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is notspecific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposeof avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or herindividual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believedto be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any timeand without notice.

greater fiscal responsibility. Older children may havemore expenses, and their extra income can be usedto cover at least some of those expenses. To ensurethat they'll have enough to make ends meet, helpthem prepare a budget.

To develop a balanced budget, children should firstlist all their income. Next, they should list routineexpenses, such as pizza with friends, money formovies, and (for older children) gas for the car. (Don'tinclude things you will pay for.) Finally, subtract theexpenses from the income. If they'll be in the black,you can encourage further saving or contributions totheir favorite charity. If the results show that yourchildren will be in the red, however, you'll need tocome up with a plan to address the shortfall.

To help children learn about budgeting:

• Devise a system for keeping track of what's spent• Categorize expenses as needs (unavoidable) and

wants (can be cut)• Suggest ways to increase income and/or reduce

expenses

The future is nowTeenagers should be ready to focus on saving forlarger goals (e.g., a new computer or a car) andlonger-term goals (e.g., college, an apartment). Andwhile bank accounts may still be the primary savingsvehicles for them, you might also want to considerintroducing your teenagers to the principles ofinvesting.

To do this, open investment accounts for them. (Ifthey're minors, these must be custodial accounts.)Look for accounts that can be opened with low initialcontributions at institutions that supply educationalmaterials about basic investment terms and concepts.

Helping older children learn about topics such as risktolerance, time horizons, market volatility, and assetdiversification may predispose them to take charge oftheir financial future.

Should you give your child credit?If older children (especially those about to go off tocollege) are responsible, you may be thinking aboutgetting them a credit card. However, credit cardcompanies cannot issue cards to anyone under 21unless they can show proof they can repay the debt

themselves, or unless an adult cosigns the credit cardagreement. If you decide to cosign, keep in mind thatyou're taking on legal liability for the debt, and thedebt will appear on your credit report.

Also:

• Set limits on the card's use• Ask the credit card company for a low credit limit

(e.g., $300) or a secured card to help childrenlearn to manage credit without getting into seriousdebt

• Make sure children understand the grace period,fee structure, and how interest accrues on theunpaid balance

• Agree on how the bill will be paid, and what willhappen if the bill goes unpaid

• Make sure children understand how long it takes topay off a credit card balance if they only makeminimum payments

If putting a credit card in your child's hands is a scarythought, you may want to start off with a prepaidspending card. A prepaid spending card looks like acredit card, but functions more like a prepaid phonecard. The card can be loaded with a predeterminedamount that you specify, and generally may be usedanywhere credit cards are accepted. Purchases arededucted from the card's balance, and you cantransfer more money to the card's balance whenevernecessary. Although there may be some feesassociated with the card, no debt or interest chargesaccrue; children can only spend what's loaded ontothe card.

One thing you might especially like about prepaidspending cards is that they allow children to graduallyget the hang of using credit responsibly. Because youcan access the account information online or over thephone, you can monitor the spending habits of yourchildren. If need be, you can then sit down with themand discuss their spending behavior and moneymanagement skills.

Page 2 of 2